I don't know what Xlobby is doing to control Insteon (not enough Xlobby documentation), but when I send my Xlobby button presses to Powerhome (to control Insteon), my lighting response is undistinguishable from instantaneous (even with this "extra" step of Xlobby to PH). So, the hardware is capable of "fast". Sorry that I am of no help for Xlobby.

it should be as fast as doing it directly through the xlobbylighting service, what your saying is it's fast in the service app but it's not fast through xlobby? is it any faster if you go into the skin editor an manually execute the lighting command directly?

it's important to know if it's slow controlling the lighting in both the service application and xlobby, if you have a plug in module you should try to plug it directly on top of the insteon plm to see how fast that is that way to eliminate the possibility of a phase issue or noise on the electrical system.